Increasing the banking levy will damage the economy

Shadow Chancellor Ed Balls pledged to increase the weekly nursery entitlement for three and four-year-olds from 15 hours. He said it underpins their guarantee “to make work pay”.

Labour would raise £800million to cover the cost by hitting banks with an increased levy. Unions and family groups welcomed the announcement.

David Hillman, of the Robin Hood Tax campaign, said: “Public services have been slashed to pay for the financial sector’s mistakes, so it is good news that Labour is asking banks to make a greater contribution.”

The Institute Of Economic Affairs said Mr Balls was treating banks as a “cash cow”.

Professor Philip Booth said: “Increasing the banking levy will reduce bank lending to both businesses and households. “This could severely damage the economy.”